Expanding society one kW-hr at a time. Blogging on the economics of various electricity-generating technologies as well as their underlying physics.

Sunday, March 27, 2011

Germany's Electricity Follies

Why is Germany supporting feed-in tariffs for solar PV? Why is a country in northern Europe spending billions of dollars to buy solar cells just so that they can pay technicians to install these cells on home that hardly see any solar radiation? There are parts of southern Europe that can see over twice the amount of average solar radiation as in Germany. Note that the manufacturing of these cells produces significant amounts of greenhouse gases. Home-installation of solar PV panels in Germany is one of the silliest things I've heard of, and we've got some silly programs here in the US (such as corn ethanol production.) [And by silly, I mean it has a negative, unsubsidized rate of return on investment and also causes an increase in the amount of greenhouse house gases than if the policy had not been followed.]

Given the recent election losses for the center-right party in Germany over the last half a year, I foresee even higher electricity prices in Germany and even more problems as the left-leaning, feed-in-tariff-friendly parties gain more political power. How does Germany expect to be generating its electricity in twenty years? Below are three problem areas that could cause Germany to lose its relative standing in the EU (compared to France) and in the world (compared to China, India). By the way, France is the only country in the EU will a decent 'energy' (i.e. 'exergy') policy. If France can continue to stick with 80% electricity generation from nuclear power and move consumers to electric powered vehicles, I expect to see France emerge as a relative power-house in Europe. (Note that the UK is still following similar feed-in tariff follies. UK feedin tariffs )

Problem#1: $0.50/kWh feed-in tariff for solar PV
Currently, the building and installing of solar panels costs more than the solar panels could generate in electricity sales over their lifetime in an unsubsidized market. So right now, the only way to make them economically viable is to have large state and federal subsidies. But just because there are subsidies, doesn't mean that building these panels isn't an overall drain on their economy. The taxes that must be paid to support the feed-in tariff (or the increase in the overall price of electricity) means that this policy is a net drain on Germany's economy. A much wiser policy would have been to invest more money in solar PV R&D before subsidizing the mass-scale production of a technology that currently consumes more electricity in the production of the PV cells than the PV cells can generate over their lifetime. Since a significant portion of the electricity used to manufacture these solar cells can come from fossil fuel combustion, it's possible that this feed-in tariff policy is both wasting of money and causing an increase in greenhouse gas emissions.

Problem#2: Idling of 7 of the their 17 nuclear power plants
The German government just recently decided to idle the oldest 7 of their 17 nuclear power plants over concerns about their safety. I do not want to speculate on the safety of these power plants, but what I'm concerned here with is that it leaves Germany with less options going forward. How does Germany expect to grow if it closes existing power plants that produce GWs of electricity and is throwing money at the installation of solar cells that consume more electricity than they will generate?

Problem#3: Will shutting down of some German coal mines lead to shutting down coal power plants?
Germany current plans to first close unproductive coal mines by 2014, followed by all hard coal mines by 2018. (Subsidised coal mines to be closed in 2014) The subsidies to German coal mines over the last forty years has been substantial. It has been estimated to be roughly $4,000,000,000 euros per year. This is roughly the same size per year as the subsidies to solar PV (that have been promised for the next 20 yrs). While the shutting down of coal mines that are expensive to run (compared to the strip mines in the Powder River Basin of Wyoming) is a good thing, the problem will be if Germany decides to close coal power plants to focus on low-to-negative rate of return on investment technologies such as solar PV or off-shore wind. If a coalition of left-leaning political parties decides to shut down coal power plants in Germany, then Germany either will become an electricity importer, or will become highly depended on natural gas from Russia, or will watch its economy shrink, or some combination thereof.

One of Germany's stated goals is to cut the national electrical consumption 50% below 2008 levels by 2050. Germany defines sustainable energy policy up to 2050 Here's the problem with cutting electricity consumption:
If you save money by not using electricity in a wasteful manner, then you still have that money and can spend it on other, more productive purposes that still require electricity. For example, if I decide to save money and gasoline by car-pooling, then I have more money to spend on more productive actions, such as investing in the stock market. Improving our 'energy efficiency' cause us to consume more electricity, not less. This is called the Jeveon's paradox. Jevons Paradox

So, there is a difference between cutting national electrical consumption by 50% and trying to stop wasteful use of electricity. To have 50% less electricity consumption, you have to actually decrease the size of your economy. So, it appears that Germany's goal is to shrink its economy. This is a problem since the goal of life is to grow and to expand. Germany seems to be purposely trying to shoot itself in the foot, and then drag us all down with them as they start asking for bailouts from their failed electricity policies. Electricity consumption is a good thing if it is used to grow the economy. Why do Germans want to make their economy smaller?

Germany will pay a price for its wasteful feed-in tariff policies. There will be a net-increase in greenhouse gases due to Germany's feed-in tariff policy. What people forget is that solar PV is not a "green" technology when the electricity used to generate the PV cells comes from fossil fuels. Since a significant number of the PV cells that Germans bought were imported from China, what happened is that Germany created a policy of paying China to pollute.

This is the folly of blindly following environmental causes without doing your homework first! You could think that supporting a politician who supports feed-in tariffs for "green" energy is a good thing, but then you might be supporting giving money to China to pollute and increase the amount of greenhouse gases compared to not-having the feed-in tariff.

What I'm trying to say here is that you have to do your homework before you support politicians who want to take your money to develop large-scale projects or give feed-in tariffs to technologies that consume more electricity and money than their produce over their lifetime.

Germans need to think clearly before their take their country off a cliff by closing nuclear plants, closing coal mines/plants, and giving feed-in tariffs. If they continue to do this, then they will have less money available for life's luxuries (science, health care, entertainment, athletics.) Germans need to calculate the return on investment and rate of return on investment of the electricity generating technologies their government supports. They are currently supporting feed-in tariffs for technologies that have negative, unsubsidized, inflation-adjusted return on investment. And supporting technology with negative return on investment is no better than paying people to do nothing. And that is where Germany is heading unless they figure out how to build electricity generating power plants with a rate of return on investment greater than 10%/year.

[Note: this is not an attack on solar PV technology, per se. I am in favor of increasing R&D in the area of solar PV, and I believe (as indicated in previous posts Self replicating solar robots) that we need to invest heavily in self-replicating solar robots. The population of self-replicating solar robots can't increase unless their rate of return on investment is positive. My problem with Germany's feed-in tariff policy is that it allows for the mass production of solar PV technology with negative rate of returns on investment.]

3 comments:

Referring to problem #3: Governments subsidies go to energy and food. This is partially re-distribution of wealth, otherwise only the non-poor could afford life' essentials.

As far as the long term investment value of solar energy. Germany is trying to improve its economy it could just build more nuclear plants. Because the future entails solar on every structure instead of more larger power plants plus large solar MW class plants in human unused areas(Deserts/Oceans). If you take into account the total environmental impact of old energy techniques(global warming and other pollutions), then it is a much closer economic competition between fossil and solar.

As far as the fairness of the markets. One needs to discuss the diversity of production or energy sources. Solar can not compete with heritage companies that hold monopolies on energy sources and thus it is the roll of "objective" government to incentives solar to be able to compete fairly in the energy market.

One may argue that there is not a monopoly because that term is reserved for companies and/or technologies. I.E. all fossil fuel originated energy production is not owned by one person or company. However, I argue and use the term monopoly to refer to an economic market situation where one idea/concept/business does not have a fair market situation due to a monopolistic situation with a huge bias towards fossil fuels.

In my opinion, the best option available for Germany would be to continue its existing nuclear power plants and then to start building new ones.

New natural gas combined cycle would probably be the cheapest solution, but I can understand Germany not wanting to become overly dependent on Russia for natural gas.

Germany is going to need some baseload power plants. Solar and wind can't provide baseload electricity. And if you were to add batteries in order to convert them to baseload power, then the costs go out the roof.

I'm pretty upset that Germany, and now Switzerland and possibly Italy, are starting to ban nuclear power plants. Many more people will die in China mining metals and coal needed to produce the materials and electricity required to build the solar cells and wind turbines that Germany will purchase than will die in nuclear power accidents.What upsets me is that I thought Germans were intelligent enough to think through the consequences of their actions. This ban seems very short sighted and self-centered.

Three Worlds, Three Mysteries

The Goal of this Blog

My goal is to communicate how life can expand and grow, both on this planet and on others. To grow, we need to obtain a large rate of return on investment from our power plants, so a main focus of this blog is on the economics of electricity generation and vehicle transportation.To summarize, the goal of life is to expand. Life requires mechanical or electro-chemical work to survive, and to grow, it requires a large, positive rate of return on work invested.

In other words, the purpose of a power plant is to make more power plants, and as quickly as possible.

After a series of posts on the topic of energy policy and economics, I thought that it'd be a good time to take a break and delve back i...

Good quotes

"The [engineer] should be equipped with knowledge of many branches of study and varied kinds of learning, for it is by his judgement that all work done by the other arts is put to test. This knowledge is the child of practice and theory."

Marcus Vitruvius Pollio, De Architectura, (~15 BC)

"The fact that the Standard Model of Physics has just enough complexity to be able to accommodate CP violation does not shed any light on the true nature of this phenomenon, and we feel the conclusion of J. Cronin's 1980 Nobel speech still stands: 'We must continue to seek the origin of the CP symmetry violation by all means at our disposal. [...] We are hopeful, then, that at some eposh, perhaps distant, this cryptic message from nature will be deciphered.' (Cronin, 1981) --Marco Sozzi, 2008, from the Coda of Discrete Symmetries and CP Violation

"Knowledge is power."

"Lastly, I would address one general admonition to all; that they consider what are the true ends of knowledge, and that they seek it not either for pleasure of the mind, or for contention, or for superiority to others, or for profit, or fame, or power, or any of these inferior things; but for the benefit and use of Life; and that they perfect and govern it in charity."— Francis Bacon

"Dare to be an optimist."

—Matt Ridley

"Stretch the range of human powers...Give us new metaphors with which to puzzle out our mysteries...Give us pride and higher aspirations...Turn our trash into treasure...Give us goals and meaning...Give us new tools with which we can connect...Validate us in our moments of confusion...Give us new rituals to make sense of our day...Give us new levels of reality...Give us your soul and bare your emotions...Give us new tools of understanding...Turn luxuries into everyday commodities...Warn us of our failings, of our conplacency, or our alternatives and of our dangers...Help us serve a purpose higher than ourselves."

—Howard Bloom, The Genius of the Beast

“Progress is possible only when people believe in the possibilities of growth and change. Races or tribes die out not just when they are conquered and suppressed, but when they accept their defeated condition, become despairing, and lose their excitement about the future.”—Norman Cousins

"If I had to choose a religion, the sun as the universal giver of life would be my god."— Napoleon Bonaparte

"Knowledge is of no value unless you put it into practice."— Anton Chekhov

"There is only one good, knowledge, and one evil, ignorance."

"Let no one ignorant of Mathematics enter [the Academy]."

— Plato/Socrates

"Perhaps the only goal on earth to which mankind is striving lies in this incessant process of attaining, in other words, in life itself..."

— Narrator of Dostoevsky's Notes from the Underground

"The physical holds no power over destiny."

—Norman Paperman

"Nature is not solely physical, even though everything in it must depend on the physical. Nature includes not only physical entities but complex material organizations, mathematical lawfulness, possibilities, life, need, behavior, intelligence, purpose, societies, minds, meanings, signs, and knowledge."

— Lawrence Cahoone, "The Orders of Nature"

"All men by nature desire knowledge."— Aristotle

"Worrying is praying for something that you don't want. So stop worrying!"

—Bhagavan Das

"Keep your head above the water and bet on the growth of your country."— Henry Flagler of Standard Oil

"Society will develop a new kind of servitude which covers the surface of society with a network of complicated rules, through which the most original minds & and the most energetic of characters cannot penetrate. It does not tyrannize, but it compresses, enervates, extinguishes & stupefies a people until each nation is reduced to nothing better than a flock of timid & industrious animals, of which the government is the shepherd."

"Socrates: 'Now, that which imparts truth to the known and the power of knowing to the knower is what I would have you term the idea of good, and this you will deem to be the cause of science, and of truth in so far as the latter becomes the subject of knowledge; beautiful too, as are both truth and knowledge, you will be right in esteeming this other nature as more beautiful than either; and, as in the previous instance, light and sight may be truly said to be like the sun, and yet not the sun, so in this other sphere, science and truth may be deemed to be like the good, but not the good; the good has a place of honor yet higher.'Glaucon: 'What a wonder of beauty that must be, which is the author of science and truth, and yet surpasses them in beauty; for you surely cannot mean to say that pleasure is the good?'

Socrates: 'God forbid, but I may ask you to consider the image in another point of view.'

Glaucon: 'In what point of view?'

Socrates: 'You would say, wouldn't you not, that the sun is not only the author of visibility in all visible things, but of generation and nourishment and growth, though he himself is not generation?'

Glaucon: 'Certainly.'

Socrates: 'In like manner, the good may be said to be not only the author of knowledge to all things known, but of their being and essence, and yet the good is not essence, but far exceeds essence in dignity and power.' "